It’s launching not one but two second-generation Android-powered, wrist-worn devices in early 2017.
Other manufacturers are also expected to unveil smartwatches based on the Android operating system during the coming year, distinguishing its smartwatch business model from the one employed by Apple Inc. (NASDAQ:AAPL). Only Apple makes smartwatches that utilize the iOS operating system.
Will Alphabet do what Apple wasn’t able to do, which is measurably improve the value of GOOGL stock by tapping into the relatively new category of consumer technology?
Maybe, but if it does, it’s going to take a massive paradigm shift that hasn’t even come close to taking shape yet.
Numbers Don’t Lie
Most owners of GOOGL stock may not even realize that Google actually beat Apple to the smartwatch market by launching one in 2014. Indeed, that’s a key tenet of the problem. If people don’t realize Alphabet makes such a device already, it’s because the company has done a poor job of marketing itself.
Fortunately for Alphabet shareholders, this shouldn’t be an impasse with the upcoming unveilings.
Unfortunately, better marketing and more consumer familiarity with the idea of wearables isn’t going to help much.
See, the smartwatch market is not a significant market for companies that drive tens of billions of dollars worth of revenue per year selling goods and services other than smartwatches. As of the most recent tally, only 39.5 million U.S. adults are expected to be smartwatch users by the end of the year. Initial estimates from a year ago said that figure would be 63.7 million.
For comparison, as of the end of last year, 68% of the nation’s 242 million adults own smartphones. That’s 164 million smartphone owners, most of whom just don’t see the advantage of yet another piece of technology on their person.
We’re seeing comparable metrics on a global basis.
What’s It Going to Take?
To answer the overarching question of marketability, look at the feedback consumers have served up about the Apple Watch and other smartwatches. Each device has some rabid fan because … well, there’s always someone who finds something to love about anything. But some of the criticisms have been repeatedly voiced.